How to keep track of day trading purchasing power?

Discussion in 'Risk Management' started by turkeyneck, May 21, 2012.

  1. My account just got hit with a DT margin call for exceeding my purchasing power and will go from 4x to 1x for 90 days. How do you keep track of your purchasing power during trading because every time you close a position, the purchasing power will immediately go back up giving you the illusion that you can initiate a bigger position than you are allowed to?
     
  2. Go by your cash balance.
     
  3. rmorse

    rmorse ET Sponsor

    Do you have enough funds for a customer portfolio margin account? It would help because you'd get more buying power. Where are you trading now?

    Bob
     
  4. I'm in the US and trading with Etrade. My account size is ~$100k.
     
  5. rmorse

    rmorse ET Sponsor

    I don't know if Etrade offers Customer Portfolio Margin. If they do, you'll need to be an experienced traders that understands options and risk of naked option selling, to qualify for a CPM account, even if you only trade equities.

    CPM with equities, will allow you to trade with a minimum 15% margin during the day and over night, while day trading margin under Reg-T is 25% during the day and 50% over night. That comes to about 6.6 to 1 leverage vs 4 to 1 under Reg-t Day trading leverage.

    The SEC regulation for CPM is $100K. Most Prime Brokers require $5M for full CPM, but some firms can do it for $125K. It's very dangerous to trade under CPM with close to $100K, because if you drop below, the account reverts back to Reg-T. It also not safe to trade with the extra margin unless you understand the risks.

    Good Luck,

    Bob